Kristina Keneally shows she's no powder puff

Kate McClymont, Michaela Whitbourn

It was a day of premiers, pole dancers and powder rooms as a corruption inquiry in Sydney continues.

''Jesus, Mary and Joseph!'' former premier Kristina Keneally said from the witness box. ''The powder room! Are you serious?''

Barrister Ian Pike, SC, who is representing former minister Joe Tripodi, had just asked Mrs Keneally whether she had a crucial conversation with Mr Tripodi in her office ''powder room''.

Even Commissioner Megan Latham was bemused: ''Are you putting to the witness that the entirety of that conversation occurred while the two of them were in the powder room at the Premier's office?''

Most ICAC witnesses wish the earth would swallow them up but not Mrs Keneally. Upon arriving she boldly announced that ''corruption was thwarted'' at Australian Water Holdings because ''two women in powerful positions said no''. She was referring to herself and to Kerry Schott, the former head of Sydney Water.

In the witness box Mrs Keneally recounted how she rejected a forged cabinet minute Mr Tripodi and his colleague Tony Kelly allegedly tried to submit to cabinet to advance AWH's cause. Their actions have been described as ''tantamount to fraud''.

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Former Sydney Water chairman Tom Parry has previously given evidence he told Mrs Keneally's office to ''drive a stake through the heart'' of the minute and if they didn't he would go to ICAC.

In her evidence Mrs Keneally said: ''This was the cabinet minute that wouldn't die until I drove a stake through its heart.'' Mrs Keneally said she had no knowledge of the ''authorship of the minute''.

The commission is investigating allegations that the family of corrupt former Labor minister Eddie Obeid had a secret 30 per cent shareholding in AWH, and that Mr Obeid inappropriately lobbied colleagues to favour the company. In other evidence, Michael Costa, who is not accused of any wrongdoing, gave evidence that Mr Obeid facilitated meetings with him and AWH when Mr Costa was treasurer.

In late 2011 Mr Costa took over from Arthur Sinodinos as AWH chairman after an approach from Eddie Obeid senior and junior.

Mr Costa quipped that he felt like Winston Wolfe, the well-dressed clean-up specialist in Quentin Tarantino's film Pulp Fiction, as he attempted to tidy up the company's affairs.

''It was clear that the expenses were out of control,'' said the former treasurer, who was horrified to learn that expenses included limousines and pole dancers.

After a $5 million injection of capital by engineering firm BG & E, Mr Costa, who was trying to rein in the excessive salaries, was furious to discover that the directors used some of the funds to pay their salaries, which were as high as $1.6 million. An earlier witness, Peter Canaway of BG &E, praised Mr Costa's efforts at AWH, saying: ''He's one of the most capitalistic socialists I've met … he understands where money comes from and where it goes.''

Former AWH chairman Arthur Sinodinos is listed to give evidence next Wednesday. Former premier Morris Iemma will give evidence on Monday. Mr Tripodi and Mr Kelly are set to give evidence on Friday, with Obeid father and son set to appear the following week.